Retirement Savings Plan (RSP)
FAQ

Aside from the obvious benefit of saving for your retirement, RSPs also have the following advantages:

• Contributions are tax-deductible and may result in a tax refund.
• Returns earned on RSP investments accumulate tax-deferred inside the plan.
• You can contribute anytime throughout the year and up to 60 days after the end of the year.

Canadian taxpayers with "earned income" in the previous tax year or those having unused contributions from previous years.

In general, you can contribute either 18% of your previous year's earned income - subject to a dollar limit - plus any unused RSP room carried over from previous years, less pension adjustments, for the previous tax year. To find out what are the RSP contribution limits for this and the past years, please visit the Canada Revenue Agency website.

Yes. Beginning with your 1991 contribution limit, you can carry forward any unused deductions indefinitely.

You can over-contribute a maximum of $2,000 during your lifetime, and deduct the over-contribution in future years - provided you have contribution room against which the deductions can be applied.

If you exceed the $2,000 over-contribution amount, a penalty tax of 1% per month will be levied on the excess amount.

Until December 31st of the year you turn 71.

• You can cash in your RSP.
• You can transfer the investments in your RSP to a Retirement Income Fund (RRIF) or Registered Annuity, from which you must begin receiving retirement income.
• Any combination of the above two options.

When you contribute money into an RSP, the contribution amount becomes deductible (subject to your personal limit) from your income tax. As well, when you withdraw money, it becomes part of your taxable income in the year it is withdrawn. When you withdraw a particular amount, a mandatory minimum amount of tax will be withheld on your behalf. You'll have to record the gross amount of the withdrawal on your income tax return that year.

With the Home Buyers' Plan (HBP), you can withdraw up to $35,000 (after March 19,2019), from your RSP to buy or build a qualifying home for yourself or for a related person with a disability. The HBP withdrawal is not subject to withholding tax.

However, you do have to pay it back into your RSP within 15 years. It's a great way to make the transition from renter to owner, especially when mortgage rates are working in your favour.

With the Lifelong Learning Plan (LLP), you can withdraw up to $10,000 a year, or up to $20,000 in total each time you participate in the LLP to help pay for your education. All you have to do is repay at least 10% per year for up to ten years. Generally, your repayments start 5 years after your first withdrawal.

It sure is! From the time you invest in your RSP, not only do the returns earned remain tax-sheltered, they can increase the value of your investments at retirement through the power of compounding. In other words, the earlier you start to contribute and the longer you leave your money invested, the greater the potential results.

Yes! You can claim undeducted contributions in future years - even past age 71.

If you know you'll earn significantly more in future years than you do today, and you have income against which you can claim an RSP deduction, then it may make sense to contribute to your RSP now, without claiming the full deduction.

Your money will earn tax-sheltered returns now and you can use the deduction later. Just make sure that you don't over-contribute.